Black swan economy brings new demand, science and technology stocks continue to be popular this year
In the context of massive unemployment, bankruptcy of a large number of enterprises and GDP decline, technology stocks are leading the V-shaped rebound of US stocks. Facebook, Netflix and Amazon, the big companies, all hit record highs in May, while Apple and alphabet, the parent company of Google, also rose.
In this round of rebound, investors flocked to buy faang (Facebook, apple, Amazon, Netflix, Google) and other technology stocks, not only reflecting the confidence of these technology giants to survive the crisis, but also indicating that investors expect the epidemic to increase the social dependence on technology. Technology companies are booming, said seema Shah, chief strategist at principal global investors. The lack of physical contact and blockade means that this is a crisis that is almost good for technology.
Take Amazon, for example, where home office and blockages push consumers from shopping malls to e-malls. Online shopping has become a rare growth highlight during the blockade period when all walks of life are affected by the epidemic. In addition, working from home makes companies more dependent on cloud computing platforms provided by Amazon, Microsoft and other technology companies, and also pushes their share prices to a high point.
Similarly, Netflix has seen a surge in online audiences during the period when there is no blockade of offline events and large-scale entertainment activities. The companys first quarter profit jumped to $709 million from $344 million in the same period last year, with an increase of 16 million subscribers in the first quarter and an additional 7.5 million subscribers expected in the second quarter.
Industry insiders expect US stocks to be on the verge of a correction, and demand for technology stocks may be on the ebb
But as valuations rise, so do risks in technology stocks. On the one hand, more and more analysts on Wall Street join the short camp, expecting the US stocks to meet the callback in the future, while the technology stocks leading the rise in the early stage will bear the brunt; on the other hand, with the global lifting of the blockade restrictions, online office and other fields will usher in demand cooling, how to maintain the growth during the epidemic remains a problem.
Manolo Falco, CO head of Citigroups investment bank, said: we absolutely believe that the market is far ahead of the reality, and the pricing cant be higher now. Coincidentally, J.P. Morgan analyst kolanovich, who has always been optimistic about the rise of U.S. stocks, also expressed caution that global risk factors will reduce the future profit space; on the other hand, although Goldman Sachs gave up the expectation that the S & P 500 would fall to 2400 points, it also pointed out that there is no room for further growth in the market.
Even the Feds support policy wont make analysts bullish. Although many people think the Feds unconventional stimulus measures are unlimited, they are not. Danny Yong, founder partner of dymon Asia capital, a hedge fund, said: investors will soon find that the so-called fed put option (the concept that the central bank will step in to support the market) may be reaching its limit; and the future stimulus policies of the government will also face internal restrictions.
On the other hand, how to maintain the rising trend after the demand ebb is still the test for some technology companies. Take zoom, a video conference company, for example. How to normalize its business is still a problem after the restrictions are lifted and employees return to the office. The total number of daily meetings of zoom reached a peak of more than 300 million in April, and the company nearly doubled its revenue forecast for the entire fiscal year to a high of $1.8 billion, but this shows that revenue will slow down significantly in the second half of this year.
In fact, many investors have chosen to put their bags on the safe side after big tech stocks hit new highs despite economic fundamentals. On the other hand, the value stocks that were sold in the early stage began to be favored by funds in the rebound. Weekly investment in finance and industry hit a 20 week high as of May 27, according to mutual fund tracker EPFR. Over the past 21 weeks, energy industry funds have announced increased investment.
Hope that the global economy is recovering from a pandemic prompted industry-oriented investors to invest more in June, Cameron Brandt, EPFR research director, said in the report Conservative investors may not believe that the worst is over in the global economy. They may value high-yield dividend payers more than high-risk, cyclical growth stocks.
In addition, every investment cycle will end eventually, and the technology enterprises represented by faang cannot lead the market up indefinitely. If US stocks are going to continue to rise, we really need to have more upside sectors rather than have everyone invest in the S & P 500s big companies, said Mike Larson, senior analyst at Weiss ratings.